The ruble slid to a record and Russia pulled bond auctions amid concern a wealth fund top-up plan will blunt central bank support for the local currency and as protests in Ukraine curbed bets on riskier assets.
The ruble lost 1 percent to 41.8345 against Bank Rossii’s target basket of dollars and euros by 6 p.m. in Moscow, when the central bank ends its market operations. A close at that level would be its lowest on record and is outside the target range the central bank set for the basket on Feb. 18. The yield on January 2028 ruble bonds, which the Finance Ministry planned to auction today, increased 18 basis points, or 0.18 percentage point, to 8.62 percent today, the highest on record.
Finance Ministry plans to buy foreign currency from the central bank will reduce the regulator’s interventions to slow the ruble’s decline, according to OAO Promsvyazbank and VTB Capital. Ukrainian bonds had the worst selloff on record and stocks fell as Poland said its eastern neighbor is on the brink of civil war after clashes in Kiev killed at least 25 people.
“Ukraine is a major focus at this point and the key factor behind the risk-off backdrop,” Benoit Anne, head of emerging-market strategy at Societe General SA in London, said by e-mail.
The Finance Ministry will buy foreign currency equivalent to 3.5 billion rubles ($98 million) per day from tomorrow through May from the central bank, which will decrease its interventions by the same amount, the ministry said in a statement yesterday. It will transfer a total of 212.2 billion rubles in foreign currencies into its Reserve Fund in the period.
“With the Finance Ministry purchases the volume of daily interventions by the central bank is effectively reduced,” Anton Zakharov, an analyst at OAO Promsvyazbank in Moscow, said by phone. “This has had an effect” on the ruble, he said.
The ministry’s strategy will have no impact on the ruble and the transactions will improve liquidity in the banking industry, Deputy Finance Minister Alexey Moiseev said yesterday.
The Russian currency weakened 1.1 percent against the dollar to 35.7985 and lost 0.8 percent to 49.20 per euro. The ruble has depreciated 8.3 percent against the greenback this year, the second-worst performance among 24 emerging-markets currencies tracked by Bloomberg.
The Finance Ministry canceled its auctions of 10 billion rubles of January 2028 bonds and 10 billion rubles of May 2020 securities, it said in website statements today. “Bids didn’t adequately reflect the credit quality of the bonds,” it said.
The yield on the government’s bonds due February 2027 rose 14 basis points, or 0.14 percentage point, to 8.46 percent, highest since July 2012.
“The central bank will effectively sell $7 billion less in the market,” Anton Nikitin, an analyst at VTB Capital said by e-mail. The auction cancellation was “no surprise given yesterday’s ruble performance in the evening and today’s price action,” he said.
Bank Rossii lets the ruble trade in a flexible corridor against the basket and raised its band by 10 kopeks to 34.80 to 41.80 on Feb. 18, it said in a website statement today. When the exchange rate breaches the boundaries, the Moscow-based regulator intervenes “without quantitative limitations” until the ruble returns to the target band or the corridor is lifted to its level, Bank Rossii said in a statement on Jan. 30.
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